Entrepreneurship and Small Business Questions and Answers

Answer: C

The psychological approach deals with the achievement motive.

Psychological theories of entrepreneurship explain it by personal traits. The best known is David McClelland's theory of the need for achievement: people with high n-Ach seek challenging goals, personal responsibility and feedback, and are the ones likely to become entrepreneurs.

The profit motive belongs to economic theories of entrepreneurship, and status is stressed by sociological theories. 'Performance motive' is not the term used in these theories.

Answer: C

SIDBI was established in 1990 as a wholly owned subsidiary of IDBI.

The Small Industries Development Bank of India was set up on 2 April 1990 under the SIDBI Act, 1989, as a wholly owned subsidiary of the Industrial Development Bank of India, to be the principal institution for financing and developing small scale industries. IDBI later divested most of its holding, ending the subsidiary status.

1969 is the year of bank nationalisation, not of SIDBI, and SIDBI was never a subsidiary of the RBI; it was IDBI that had been a subsidiary of the RBI before 1976.

Answer: C

A specialised firm that finances young startups is a venture capital firm.

Venture capital firms raise funds from investors and invest them, usually as equity, in new, high-risk, high-growth businesses that cannot yet raise money from banks or the stock market. In return for the risk they take a significant stake and often a role in management, and they exit later through a sale or a public issue.

Finance companies make loans and leases to borrowers in general. 'Small Business Finance Co.' and 'Capital Creation Co.' are not the recognised name for this kind of specialised investor.

Answer: A

The reason that is not significant is self image as it relates to status.

Studies of women entrepreneurs report that women most often start businesses for independence and flexibility in working hours, to balance work and family, to keep themselves gainfully occupied, and to earn money for the family. These are the pull and push factors commonly cited in the Indian literature on women entrepreneurship.

Status and self-image appear far less often as a motive, so it is the one option that is not a significant reason. The other three are all among the reasons usually listed.

Answer: A

A climate for intrapreneurship is supported when experimentation, trial and error is encouraged.

Intrapreneurship is entrepreneurial behaviour by employees inside an established organisation. Hisrich and Peters list the features of an intrapreneurial climate: the organisation operates on the frontiers of technology, encourages new ideas, encourages trial and error, allows failures, removes barriers to opportunity, makes resources available, uses a team approach and takes a long time horizon.

The other three options are the opposite of those conditions: not allowing failures, putting barriers in the way of new products, and limited resources with short-term goals all stifle intrapreneurship.

Answer: A

Entrepreneurship is best described as a process involving innovation, new products or services, and value creation.

Modern definitions, such as Hisrich's, treat entrepreneurship as the process of creating something new with value, devoting the necessary time and effort, taking on the financial, psychological and social risks, and receiving the rewards. Innovation and the creation of value are at its centre.

A strong vision and the willingness to take risk are characteristics of entrepreneurs, but each describes only one part of the process. Entrepreneurship also does not require setting up a separate business: it can take place inside existing organisations, as intrapreneurship.

Answer: C

A patent gives the owner a negative right over an invention.

A patent does not give its owner a positive right to use the invention; it gives the right to exclude others from making, using, selling or importing the patented invention for a limited period, usually 20 years. In India this right is conferred by the Patents Act, 1970.

Copyright protects the expression of original works such as books, music and software, not inventions. A trade mark protects a name, logo or sign that distinguishes goods or services. A trade secret is protected only by keeping it confidential, and gives no right against someone who discovers it independently.

Answer: C

MUDRA Bank was set up under the Pradhan Mantri Mudra Yojana.

Launched in April 2015, the Pradhan Mantri Mudra Yojana provides loans of up to Rs. 10 lakh to non-corporate, non-farm micro and small enterprises in three categories, Shishu, Kishore and Tarun. MUDRA (Micro Units Development and Refinance Agency) refinances the banks, NBFCs and microfinance institutions that lend under it, reaching small entrepreneurs through last-mile agents.

The Jan-Dhan Yojana is about opening bank accounts, 'Atal Bihari Mudra Yojana' does not exist, and 'Pradhan Mantri Employment Yojana' is not the scheme under which MUDRA was set up.

Answer: C

The paper's key is Manufacturing Units and Business Units under SBF and C & I units.

Small and medium enterprises are not limited to factories: a bank's SME segment covers manufacturing units and units in trade and services. The first, second and fourth options each name only one kind of unit ('only'), so they leave out part of the segment. The third is the only option that covers both manufacturing and business units.

The question does not say which bank's definition it uses, and SBF and C & I are not expanded, so I could not check the wording against a bank's own definition; the answer rests on the key and on the 'only' elimination.

Answer: A

The Kohli Committee criterion is erosion in net worth to the extent of 50%.

The Working Group headed by S.S. Kohli (2000) defined a small-scale unit as sick if any of its borrowal accounts remained substandard for more than six months, or if there was erosion in its net worth due to accumulated cash losses to the extent of 50 percent of its net worth during the previous accounting year, the unit having been in commercial production for at least two years. These criteria were used in the Third All India Census of Small Scale Industries.

An 80 percent erosion, a three-month delay in repayment and a one-year decline in output are not the Kohli criteria.